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FIN3701 ASSIGNMENT 2 SEMESTER 2 - 2023 (520459)
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FIN3701 ASSIGNMENT 2 SEMESTER 2 - 2023 UNIQUE NUMBER: CLOSING DATE: 14 SEPTEMBER 2023 QUESTION 1 REQUIRED: 1.1 Calculate the WACC associated with each range of financing/break-point. (18 marks) 1.2 In which project do you recommend that the company invest its funds? Give motivat...

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  • September 6, 2023
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  • 2023/2024
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  • fin3701 assignment 2 semester 2 2023 520459

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FIN3701 ASSIGNMENT 2
SEMESTER 2 - 2023
UNIQUE NUMBER: 520459


DUE DATE: 14 SEPTEMBER 2023

, ASSIGNMENT 2

UNIQUE NUMBER: 520459

CLOSING DATE: 14 SEPTEMBER 2023

MARKS: 50



QUESTION 1

REQUIRED:

1.1 Calculate the WACC associated with each range of financing/break-point.

This question assesses your knowledge regarding the application of the various components
of capital, the weighted average cost of capital (WACC) and the weighted marginal cost of
capital (WMCC). You have to know how to calculate the level of total new financing at which
the cost of one of the financing components will rise and in turn casue an upward shift in
the WMCC.

For instance, when the level of total financing rises from the ranges of R0 – R375 000 to
R375 000 – R625 000, the cost of debt changes from 6.37% to 10% and when the level of
total financing changes from the ranges of R375 000 – R625 000 to R625 000 and above, the
cost of equity rises from 14.11% to 11.50%.



CALCULATIONS:




1

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